Business Law Test 2 Review

Express Contracts

are all clearly set forth in either written or spoken words. Notes- It's all there, nothing hidden, all therms clear oral or written.

Monetary Damages

are also referred to as legal damages or legal remedies, and they include compensatory, punitive, nominal, and liquidated damages

Legal Principle

*If the licensing statue is intended simply to generate revenue, then the contract of an unlicensed person is valid, if the purpose of the licensing statue is to protect the public's health, safety, and welfare, however, the agreement of an unlicensed person is typically deemed illegal and unenforceable.*

Exceptions to Consideration

*Promissory Estoppel*- the legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract. Occurs when three conditions are met- -One party makes a promise and either knows or should know that the other party will reasonably rely on it. -The other party does reasonably rely on the promise. -The only way to avoid injustice is to rely on the promise. *contract under seal*- is second exception to the rule requiring consideration. In the past, contracts were sealed with a piece of soft wax into which an impression was made. typically identified with the word seal or the letters L.S. (locus sigilli which means the place for the seal). The parties using them are presumed, without evidence to the contrary, to be adopting the seal for the contract. 10 states still allow a contract without consideration to be enforced if it is under seal. *Legal Principle- Promissory estoppel and contracts under seal are two exceptions to the common law rule requiring consideration.*

Discharge by Operation of Law

-Alteration of Contract -Bankruptcy -Tolling of Statute of Limitations -Impossibility of Performance -Commercial Impracticability -Frustration of Purpose

Rights that cannot be assigned

1) Rights that are personal in nature. Meaning the obligor has promised something specific to the person receiving it. Third parties cannot legally become the recipient of such situations unless the only part of a contract left to be fulfilled is the payment, because rights to payment can always be assigned. For Example, A worker received $10,000 to sign an agreement not to compete for one year if he left the comp. The company was sold and the worker refused to sign a noncompete agreement with the new firm and he quit and went to work for a competitor. When the new company sued him to enforce the noncompete agreement he had with the other comp, the court ultimately found that the agreement could not be assigned. 2) Rights that increase the obligor's risk or duties. For example, Ben agrees to replace the siding on Erin's two-bedroom ranch. Erin cannot assign her right to Ben's services to Chris, who lives in a three-story, five-bedroom house, because Ben's duties would be greatly increased by the change. 3) Rights whose assignment is prohibited by contract. When parties include an antiassignment clause in their contract, the parties are attempting to limit their ability to assign their rights under the contract. If worded improperly or ambiguously, the clause does not effectively limit assignments. But the right to assign monetary payments cannot be denied, also these clauses do not affect assignments made by operation of law, and assignments of the right to receive damages for a breach of contract to sell goods or services are unaffected. 4. Rights whose assignment is prohibited by law or public policy.

Duties that Cannot be Delegated

1. duties that are personal in nature. Example, if you hire a famous artist, she cannot delegate his duty. Someone who was sought out for his management skills, his contractual duties are considered personal and therefore cannot be delegated. 2. duties for which the delegatee's performance will vary significantly from the delegator's. When performance would differ substantially from what the obligee contractually has the right to, courts will rule that the delegation is ineffective. 3. duties in contracts that forbid delegations.

Elements of a contract

4 elements are necessary for contracts to exist. *The agreement, the consideration, contractual capacity and legal object, (and mutual assent).* Notes- Agreement- offeror communicate the offer to the offeree, all material terms. Material terms are details you'll use to make decision on (or important terms that help you make a decision). Offeree communicates acceptance, mirror image rule. Mirror image- see if material terms are the same when offer is accepted, otherwise it is rejected. Consideration- bargained for exchange Legal capacity- minors can enter into contracts but can resend them. They can do this til they are 18 or a little after. Lawful object - Not underground like buying drugs. Has to be lawful. If it's against public policy, courts will not enforce it. Mutual assent- aka meeting of the minds

Discharge by Material Breach

A breach occurs when a party fails to perform her obligations under the contract. If the breach is a minor one, it may entitle the nonbreaching party to damages but it does not discharge the nonbreaching party from the contract.

Legal Principle

A condition precedent exists when a condition must occur before a party's duty to perform arises, whereas a condition subsequent exists when the occurrence of the condition extinguishes a party's duty to perform.

Express conditions

A condition specifically and explicitly stated in a contract and usually preceded by words such as conditioned on, if, provided that, or when. For example, in a situation involving a potential sale of a house, the offer expressly required that the buyer make a deposit of $1,000 "on acceptance"

Chap 20 Conditional Contracts

A contract that becomes enforceable only on the happening or termination of a specified condition.

Lack of Consideration

A court will enforce one party's promise only if the party promised some consideration in exchange. A mutual exchange of something of value.

Negligent Misrepresentation

A false statement of material fact made by a person who thinks it is true but who would have known the truth about the fact had he or she used reasonable care to discover or reveal it. In some contract negotiations, one party makes a statement of material facts that he things is true. If he could have known the truth by using reasonable care to discover or reveal it, his statement is a negligent misrepresentation.

The Acceptance

A key factor in the agreement element of a contract; consists of the agreement of one party, the offeree, to the terms of the offer in the contract made by the other party, the offeror.

Liability of Minors For Necessaries

A necessary is a basic necessity of life, generally including food, clothing, shelter, and basic medical services. Technically, minors can disaffirm contracts for necessaries, but they will still be held liable for the reasonable value of the necessary. The purpose of this limitation on the minor's right to disaffirm is to ensure that sellers will not be reluctant to provide minors the basic necessities of life when their parents will not provide them. An item is considered a necessary also depends on whether the minor's parents are willing to provide it. An item considered a necessary for a child of upper-income parents can be a luxury to a child of lower-income parents.

Mirror Image Rule

A principle which holds that the terms of an acceptance must mirror the terms of the offer. If the terms of the acceptance do not mirror the terms of the offer, no contract is formed and the attempted acceptance is a counteroffer. When a bilateral contract is being formed under the common law, the mirror-image rule applies to the acceptance.

Preexisting Duty

A promise to do something that one is already obligated to do. It is not considered valid consideration. There are two parts to this rule. (1) Performance of a duty you are obligated to do under the law is not good consideration. And (2) performance of an existing contractual duty is not good consideration. Example- (1) If someone offers a reward for the capture of a suspect, a police officer may not collect it, as he or she was already obligated to apprehend the suspect. (2) And If Jen decides to have a pool built in her backyard. Under the existing contract, the pool is to be completed by June 1. The contractor explain that due to a shortage of workers, the completion date cannot be met, however, if Jen were to pay an extra $5,000, additional workers could be hired and the pool completed on time. Jen tells the contractor she will pay the 5k. On June 1, the pool is completed and the contractor asks for the additional payment. Is Jen legally obligated to pay? No, because the contractor had a preexisting contractual duty to complete the pool by June 1.

Rescission

A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made. the termination of the contract. an equitable remedy

Illusory Promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration. Example, Shawn offers to sell Molly his skis for $300. Molly responds, "I'll look at them in the morn, and if I like them, I'll pay you." Molly hasn't committed to doing anything. The law considers this an illusory promise- it is not a promise at all. Legal Principle- An illusory promise is not consideration.

Material Breach

A substantial breach of a significant term or terms of a contract that excuses the nonbreaching party from further performance under the contract and gives the nonbreaching party the right to recover damages.

Unconscionable

A term applied to a contract in which one party has so much more bargaining power than the other party that the powerful party dictates the terms of the agreement and eliminates the other party's free will. Some agreements are so one-sided that the courts will not make the innocent party be harmed by fulfilling his or her contractual duties. The common law *would not enforce* these contracts. These heavily one-sided agreements are known as unconscionable agreements. Unconscionable refers to the fact that the agreement in question is so unfair that it is void of conscience. There are two main types of unconscionable agreements, procedural and substantive. trick- think of without conscience. Also inconceivable in English and used more often in Spanish, inconcebible.

Contracts for the sale of goods totaling more than $500

Agreements for a sale in which the total price is $500 or more are required by the UCC, Section 2-201, to be recorded in a writing contract or a memorandum.

Contracts that violate state or federal statues

Agreements to commit a crime or tort are illegal in all states. *Agreements made for the purpose of protecting the public's health, safety, or welfare by a party unlicensed to do so are typically illegal in all states.* *physicians and lawyers, require occupational licenses and cannot collect on the agreement without one, it's unenforceable*. Plumbers, taxi drivers, and electricians require licenses but if they don't have one, they can still collect even if they must pay the state a fine for working without one. Agreements regarding usurious loans may be illegal in some states. Agreements regarding gambling are illegal in most states. Agreements that violate Sabbath or Sunday laws are illegal in some states.

Recovery Based on Quasi-Contract

Aka recover in quantun meriut. When an enforceable contract does not in fact exist, the court may grant a recovery based on quasi-contract; that is, the court may impose a contractlike obligation on a party to *prevent an injustice* from occurring. Recovery in quasi contract is often sought when a party thought a valid contract existed and thus gave up something of value in relying on the existence of a contract. Must prove 1. the plaintiff conferred a benefit on the defendant. 2. the plaintiff had reasonably expected to be compensated for the benefit conferred on the defendant. 3. the defendant would be unjustly enriched from receiving the benefit without compensating the plaintiff for it. Quasi is always to prevent unjust enrichment. Think of Quasimodo, how his condition is so *unjust* from our eyes. an equitable remedy

Material Terms

Allow a court to determine damages in the event that one of the parties breaches the contract. They include the subject matter, price, quantity, quality, and parties.

Notice of Assignment

Although notice need not be given for a valid assignment, it is usually a good idea for the assignor or the assignee to notify the obligor. Assignments are effective immediately regardless of notice, but by providing notice the assignor can help avoid two serious complications. The first possible complication occurs if the obligor fulfills the contract as written. Because fulfilling the contract discharges the obligor's duties, the act also discharges the assignee's claim on the assignor's right. However, once given notice, the obligor can discharge his contractual obligations only by fulfilling the contract for the assignee. For example, suppose Stefan contracts Latoya to purchase her speedboat. Latoya assigns her right to collect Stefan's money to Meghan. Neither Latoya nor Meghan notifies Stefan of the assignment. Accordingly, Stefan pays Latoya for the boat. His contractual duties have been discharged, and Meghan cannot request performance from him. Had Stephan been notified about the assignment, the only way he could fulfill his contractual obligations would be by paying Meghan the money owed to Latoya. If, after receiving notice, Stefan pays Latoya, Meghan may still legally request that he pay her. Giving the obligor proper notice avoids such problems with performance. The second complication occurs when an assignor assigns two or more parties the same right, and confusion arises as to which party has the right to the contract. Legal Principle- The assignee should always give notice to the obligor as soon as possible after receiving the assignment, because the obligor may satisfy his or her obligations by performing for the assignor until receiving notice of the assignment from the assignee.

Partial Performance

Although the statute of frauds requires a writing for sales of interests in land, under this exception, the buyer in an alleged contract for the sale of land has paid any portion of the sale price, has begun to permanently improve the land, or has taken possession of it, the courts will consider the contract partially performed and this partial performance will amount to proof of the contract

Acceptance

An acceptance of the terms of the offer by the other party, called the *offeree*.

Accord and Satisfaction

An accord and satisfaction is used when one of the parties wishes to substitute a different performance for his or her original duty under the contract. The promise to perform the new duty is called the *accord*, and the actual performance of that new duty is called the *satisfaction*. The party's duty under the contract is not discharged until the new duty is actually performed. Thus, it is the satisfaction that discharges the party.

Mutual Rescission

An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of the agreement is to restore the parties to the positions they would have occupied had no contract ever been formed. trick- Rescind is to take back.

Option Contract

An agreement whereby the offeree gives the offeror a piece of consideration in exchange for the offeror's agreement to hold the offer open for a specified period of time. It could be money. Example- like in real estate, when you want to have the option of purchasing a property, you can give the person selling some money ($1000 or w/e) for a time period option to purchase. If you buy, the money will be deducted from the purchase price. If you don't, the person selling the property keeps the money.

Specific Performance

An equitable remedy requiring the breaching party to *perform as promised* under the contract; usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (for example, real property). aka specific enforcement. an equitable remedy

Legal Principle

An express condition is clearly stated, whereas an implied condition is not stated but can be inferred from the nature and language of the contract.

Informal Contract aka Simple Contract

Any contract that is not a formal contract. They might be complex but are called simple because no formalities are required in making them. They may appear less official but are just as important and legally binding as their more formal counterparts. Ex. even a handwritten note.

Parents' Liability for their Children's Contracts, Necessaries, and Torts.

As a gen rule, parents are not liable for contracts entered into by their minor children. Thus, merchants are often reluctant to enter into contracts with minors unless some minor competent person is willing to cosign and become legally bound to perform if the minor no longer wishes to live up to the terms of the contract. Parents do have a legal duty to provide basic necessities of life. In most states, minors are liable for a minor's personal torts. In some states, parents may be liable when a child causes harm if it can be proved that the parents failed to property supervise the child, thereby subjecting others to an unreasonable risk of harm.

Executory

As long as some of the terms have not yet been performed, the contract is executory.

Type of Contract

Bilateral - Promisor (a promise), Promisee (a promise). Unilateral- Promisor (a promise), Promisee (an act).

Classification of Contracts

Bilateral- Consists of a promise in exchange for a promise. or Unilateral- Requires a performance by the offeree to form a contract. Express- The terms of the contract are clearly formed either in written or spoken words. or Implied- Arises from the conduct of the parties rather than their words. Executed- A contract whose terms have been fully performed. or Executory- A contract in which not all the duties have been performed. Formal- Contracts created in a specific manner: contracts under seal, recognizances, letters of credit, and negotiable instruments. or Informal- Simple contracts that require no formalities in making them; payment can be demanded by the payee (a person to whom money is paid or is to be paid) at any time (e.g., checks) Valid- A contract that has all the legal elements of a contract and thus can be enforced. or Void- Not a contract because either its object is illegal or it has a serious defect. or Unenforceable- A valid contract that can't be enforced because some law prohibits it. or Voidable- A contract in which one or both parties has the ability to either withdraw from or enforce the contract.

Chap 16 Capacity & Legality

Capacity - is the third element of a legally binding contract. The legal ability to enter into a binding contract. A person who has legal capacity has the mental ability to understand his or her rights and obligations under a contract and therefore presumably to comply with the terms. *Incapacity or Incompetence* - is the possession of a mental or physical defect that prevents a natural person from being able to enter into a legally binding contract. Can either have no capacity (inability to enter contracts) or limited capacity (ability to form only voidable contracts).

Contractual Capacity (3rd element)

Capacity is the legal ability to enter into a binding agreement. Most adults over the age of majority have capacity, those under the age of majority, people suffering from mental illness, and intoxicated persons do not.

Legal Principle

Concurrent conditions exist when the parties are to perform their obligations for each other simultaneously.

Object Theory of Contracts

Contract law is based on an object theory of contracts, which means we base the existence of a contract on the parties' outward manifestations of intent and we base its interpretation on how a reasonable person would interpret it. Thus, the subjective intent of the parties is not usually relevant; what matters is how they represented their intent through their actions and words. The subjective intent may be relevant, however, under a limited number of circumstances. If a mutual misunderstanding between the parties exists, and if as a result they did not really come to a meeting of the minds, there is no contract. The courts may then look at how each party subjectively interpret the situation to determine whether the parties really reached an agreement. Legal Principle: In determining whether parties intended to enter into a contract, the courts look at their objective words and behavior and do not try to figure out what they might have been secretly intending. Notes- used in the US. Court looks at outside manifestation, not what you're secretly thinking in your mind. -How would a reasonable person interpret outward manifestation is decided by the Jury but most parties want a judge, not jury to decide on contract cases.

Obligees

Contractual parties who agreed to *receive something* from the other party. Think-free as queen bees, receive something.

Accord and Satisfaction (chart)

Debt Disputed? Yes-amount of debt in dispute. Status of Debt- Unliquidated. Payment? Debtors offers to pay less money than creditor believes is owed as full payment, and creditor agrees. Create an accord? Yes. Create a satisfaction? Yes. Once debtor pays the money agreed to, the debt is satisfied and the creditor may not collect any additional money. Debt Disputed? Yes-existence of debt in dispute Status of Debt Unliquidated Payment? Debtor offers to pay a sum of money as full payment when debtor does not believes Create an accord? Yes Create a satisfaction? Yes. Once the debtor pays the money agreed to, the debt is satisfied and the creditor may not collect any additional money. Debt Disputed? No dispute over amount of debt or existence of debt. Status of Debt Liquidated Payment? Debtor offers to pay less money than is owed as full payment, and creditor agrees. Create an accord? No Create a satisfaction? No. Even if the debtor pays the money agreed to, the creditor may still sue for the balance it believes is owed. Debt Disputed? No dispute over amount of debt or existence of debt. Status of DebtLiquidated. Payment? Debtor offers a different payment (e.g., her car) as full payment. Create an accord? Yes Create a satisfaction? Yes. Once the debtor makes a different payment, the debt is satisfied and the creditor may not collect anything else.

Legal Principle

For a promise to be enforced by the courts, there must be consideration.

Legal Principle

If the court can sever the illegal part of a contract from the legal part, it will generally do so and enforce only the legal part; if the contract is indivisible, then it generally will be unenforceable. indivisible means that it cannot be divided.

Counteroffer

If the offeree offers a counteroffer, the original offer is terminated.

Nominal Damages

In a case where no actual damages resulted from the breach of contract, the court may award the plaintiff nominal damages. Typically for $1 or $5, but it serves to signify that the plaintiff has been wronged by the defendant.

Condition Subsequent

In a contract, a future event that terminates the obligations of the parties when it occurs. For example, Joan (of arc =) may enter into an agreement to lease an apartment for five years, conditioned on her not being called to active duty in the National Guard. If she is called to serve, her obligation to be bound by the lease is discharged. trick- remember subsequently means after a particular thing has happened; afterward.

Condition precedent

In a contract, an event that must occur in order for a party's duty to arise. Example, if Bill purchases a life insurance contract, he is obligated to pay the monthly premiums specified in the contract but the insurance company's obligation to perform arises only when he dies. His death is the condition that triggers the comp's duty to pay his beneficiary. Also, real estate contracts are conditioned on an event such as the buyer's being able to sell his current home by a certain date. If the home does not sell, the condition does not arise. Thus, the parties have no duty to perform and are discharged from the contract. trick- remember preceding.

Consequential Damages

In a contract, foreseeable damages that result from special facts and circumstances arising outside the contract itself. The damages must be within the contemplation of the parties at the time the breach occurs. Also called special damages. Legal Principle- Special damages will be awarded only when the special circumstances that give rise to the damages are known to both parties at the time the parties entered into the contract. Example, if Hadley orders a a mill shaft and the maker promises to bring it the next day but doesn't and the mill stays closed for 5 days, the special damages for lost profits will be awarded only if the maker knew that the mill would not open without the mill shaft. They both had to know.

Mistake of fact

In contract law a mistake of fact is an erroneous belief about the *facts* of the contract at the time the contract is concluded. Legal assent is absent when a mistake of fact occurs. (1) A mistake that is not caused by the neglect of a legal duty by the person committing the mistake but, rather, consists of unconscious ignorance of a past or present material event or circumstance. (2) An affirmative dense in which the defendant tries to prove that she or he made an honest reasonable mistake that negates the guilty-mind element of a crime.

Discharge by Mutual Agreement

Sometimes the parties agree to discharge each other from their contractual obligations. They may do so through four primary means: discharge by mutual rescission, discharge by a substituted contract, discharge by accord and satisfaction, or discharge by novation.

Manifestation of intent to be bound to the contract

In general, there are two ways an offeree can manifest intent to enter into the contract: by performance or by a return promise. The offeree must either do or say something to form the contract. If the offer is for a unilateral contract, the offeree can accept only by providing the requested performance. Like if Bill offered to pay $500 to anyone who returned his lost dog to him, Mary could accept the offer only by returning the dog.

Exceptions to the Minor's Right to Disaffirm the Contract

In most states, courts or state lesgislatures have determined that the minor should not have the right to disaffirm contracts for life insurance, health insurance, psychological counseling, the performance of duties related to stock and bond transfers and bank accounts, education loan contracts, child support contracts, marriage contracts, and enlistment in the armed services. Also, while the majority rule is that a minor's misrepresentation of age does not affect the minor's right to disaffirm the contract, some states hold that when a minor who appears to be of the age of majority misrepresents his or her age and a competent party relies on that misrepresentation in good faith, the minor gives up the right to disaffirm the agreement and can be treated as an adult. Other states have compromised, either by requiring that the minor restore the competent party to that party's precontract position before allowing the disaffirmance or by allowing the minor to disaffirm but then giving the competent party the right to sue the minor in tort and recover damages for fraud.

Equal dignity rule

In some states, under the equal dignity rule contracts that would normally fall under the statute and need a writing if negotiated by the principal must be in writing even if negotiated by an agent. For example, Luke appoints Sanjeev to act as his agent. Sanjeev enters into an agreement for Luke and Carrie that cannot be completed within one year according to the contractual terms. Had Luke contracted directly with Carrie, the agreement would be within the statute and require a writing. Therefore, Sanjeev's contract, which is on behalf of Luke, must also be in writing according to the equal dignity rule. Some states require, to be enforceable, a promise to pay a debt that has already been discharged because of bankruptcy to be in writing to prevent the promisor from hiding behind the fact that the debt has been discharged. Also needs to be in writing a promise to pay a debt when collection is barred by a statute of limitations. Also a contract that cannot be performed in the promisor's lifetime must be in writing. Like a promise to pay money to a charity after death.

Party gains rights to a contract in two situations.

In the first, one of the contracting parties transfers rights or duties to the third party, in the second, the third party is a direct beneficiary of a contract between two parties.

Intoxicated Persons

Include those under the influence of alcohol or drugs. Restatement of Contracts, Section 16, provides that contracts of an intoxicated person are voidable if the other party had reason to know that intoxication rendered the person unable to understand the nature and consequences of the transaction or unable to act in a reasonable manner in relation to the transaction. If the intoxication merely causes someone to exercise poor judgement, the person's capacity is not affected unless the other party unfairly capitalizes on this impaired judgment. Once sober, the previously intoxicated person has the ability to either ratify or disaffirm the contract. Ex. If Jim became intoxicated at a bar and Sally took advantage by getting him to sign a contract to sell her his SUV for $8,000. Any act Jim takes consistent with ratification after becoming sober will result in a binding contract. Like if Sally shows up at his house the next morn with the cash, shows him the contract drafted on a napkin he signed, and asks for the keys and the title, by giving her the keys and saying, "I knew I shouldn't have drunk that much," Jim has entered into a binding contract. If the contract is disaffirmed on the basis of intoxication, each party must return the other to the condition he or she was in at the time they entered into the contract. Just as with contracts of minors and mentally incapacitated persons, the courts will enforce an intoxicated person's contract for necessaries for their reasonable value.

Chap 15 Consideration

It is what a person will receive in return for performing a contract obligation. Consideration can be anything, as long as it is the product of a bargained- for exchange. In bus, often money. Example, Dan agrees to purchase Marty's car for $1,000. Dan's payment of $1,000 is the consideration Marty will receive for the car. Title to and possession of the car are the consideration Dan will receive in exchange.

Voidable

Jamal may think he has sold his tutoring services to Harrison. However, without legal assent the contract may be voidable, a circumstance that can cost a business large profits when the transaction is significant. A term applied to a contract that one or both parties have the ability to either withdraw from or enforce.

Sources of Contract Law

Legal Principle- All contracts are governed by either *common law or the Uniform Commercial Code (UCC)*. If the contract is for the sale of a good, it falls under Article 2 of the UCC; if it is for anything else, it falls under common law. Common law is where 99% of your law comes from. For Common Law - Prominent legal scholars, recruited by the American Law Institute, organized the principles of the common law of contracts into the original Restatement of the Law, Contracts. The compilation has been revised and published as *Restatement of the Law Second, Contracts. The Restatement (second) is not actually the law itself, although judges frequently cite it because it is an authoritative statement of what the law is. Notes- came together to restate laws, come up with general statements of law. When you have an enforceable contract, the law will provide a remedy.

Mentally Incapacitated Persons

Legal Principle- Contracts of a person with limited mental capacity can be valid, voidable, or void, depending on the extent of the mental incapacity. If a person suffers from delusions that may impair his judgement but he can still understand that he is entering into a contract and understand his obligations under the contract, his contract is valid; if his delusions prevent him from understanding that he is entering into a contract or the nature and extent of his obligations under the contract, his contract is voidable, and if he has been adjudicated insane, his contract is void. Example of voidable, if Gina's delusions persuaded her that she's only giving her autograph, then the contract is voidable. She may disaffirm it at any time until a reasonable time after she no longer suffers from the mental deficiency. Void examples- adjudicated insane, adjudicated habitual drunkards that have a guardian, Alzheimer's disease.

Legal Principle:

Legal Principle: A legally binding contract requires four elements: agreement, consideration, capacity, and legal object.

Past Consideration

Legal Principle: Past consideration is no consideration at all. Imagine that after 5 yrs of working well, your boss says that he's going to give you 5% of the company stock but 6 months later you still haven't received the stock. You may not sue your boss to enforce the promise because for a promise to be enforceable, there must be bargaining and an exchange. Because your work has already been performed, you have given nothing in exchange. A promise can't be based on consideration provided before the promise was made. Exception to this rule. Under the Restatement (Second) of Contracts (a persuasive, though not binding, authority), promises based on past consideration may be enforceable "to the extent necessary to avoid injustice." In some cases, if past consideration was given with expectation of future payment, the court may enforce the promise.

Circumstances in Which the Statute of Frauds Applies (My Legs)

Marriage Year (terms prevent performance within one year) Land (related to interest in land) Executor Goods ($500 or more) Suretyship + Guarantee Executor (contract in which the executor promises to pay the debt of an estate with the executor's own money).

Disaffirmance of the Contract

Minors have the right, until a reasonable time after reaching the age of majority, to disaffirm or void their contracts. The adult with whom the minor entered into the contract can't. No formalities required to disaffirm the contract, the minor need only show an intention to secind it, either by words or actions. But must void the entire contract, can't choose to disaffirm only a portion of it. Traditionally, most states simply required the minor to notify the competent party and return any consideration received, regardless of its condition. If the consideration had been damaged or destroyed, the other party had no recourse against the minor. A number of states have modified the duty of the minor on disaffirmance, holding that the minor has a duty of restitution, requiring that she or he place the competent party back in the position that party was in at the time the contract was made. Disaffirmance must occur before or within a reasonable time of the minor's reaching the age of majority.

Minors

Minors may enter into only voidable contracts. Today, in all but three states, a minor is someone under the age of 18. But in most states a person is given full legal capacity to enter into contracts when he or she becomes emancipated. Emancipation occurs when a minor's parents or legal guardians give up their rights to exercise legal control over the minor, typically when the minor moves out of the parents' house and begins supporting himself or herself. Minor petitions court for emancipation. In most cases, when a minor marries, she or he is considered emancipated. Legal Principle- As a general rule, any contract entered into by a minor is voidable by the minor until he or she reaches the age of majority or a reasonable time thereafter.

Ratification

Once a person reaches the age of majority, he or she may ratify, or legally affirm, contracts made as a minor. Once ratified, the contract is no longer voidable. Ratification may be express or implied.

Executed

Once all the terms of the contract have been fully performed, the contract has been executed.

Mutual

Or mistakes can be mutual, shared by both parties to the agreement. For a mutal mistake to interfere with legal consent, *all* the following must be present: 1. A basic assumption about the subject matter of the contract. 2. A material effect on the agreement. 3. An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement. Courts will not void contract for reason of mutual mistake if even one of these conditions is missing.

Sufficiency of the writing

Requirements of writing sufficient to satisfy the Statute of Frauds under the common law. Name of the parties to the contract. The subject matter of the agreement. The consideration given for the contract. All relevant contractual terms. The signature of at least the party against whom action is brought.

Example

Sheila assigns her contractual rights to Tony. A week later, she assigns the same rights to Cho. Under the first assignment in time rule, Tony legally has Sheila's rights to the contract. However, if Cho gives notice first and the state in question uses the English rule, although Sheila assigned her rights to Tony first, legally Cho possesses them.

Silence as a form of acceptance

Silence as a general rule, cannot be used to form a contract. Like if Marie leaves Lisa a message saying "I can't work my 3 night shifts this week, if you cover them for me, I'll pay you an extra $40 on top of the money you'll receive from the boss. If I don't hear from you by 7pm, I'll assume we have a deal." If Lisa doesn't call back, no contract has been formed because silence under these circumstances will no constitute acceptance. In some cases, silence can mean acceptance. Like if parties, by their previous course of dealing with each other, have established a pattern of behavior whereby it is reasonable to assume silence communicates acceptance. Like if a wholesaler and a retailer have a long standing relationship in which the retailer will reject a shipment that does not meet his needs, when a shipment is not sent back it is reasonable for the wholesaler to assume that the retailer means to accept it. Silence can also be acceptance when the offeree receives the benefits of the offered services with reasonable opportunity to reject them and knowledge that some form of compensation is expected yet remains silent. A third situation occurs when the parties agree that silence will be an acceptance. Like if someone joins a book club whose contract proves that a new book will be sent every month.

Agreements in Contradiction to Public Policy

Some types of agreements are not illegal per se, as they are not in violation of any statue or legal code, but are nevertheless unenforceable because courts have deemed them to be against public policy.

Unenforceable Contract

Sometimes a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it. Notes- When enter into contract with someone who's insane. or Something in the contract might be wrong.

Reformation

Sometimes a written contract does not reflect the parties' actual agreement, or there are inconsistencies in the contract, such as the price being listed as $200,000 (twenty thousand dollars). In such a case, the written document may be rewritten to reflect what the parties had agreed on. think- of reforming something an equitable remedy

Chap 18 Statues of Frauds

State-level legislation that addressed the enforceability of contracts that fail to meet the requirements set forth in the statue; *serves to protect promisors from poorly considered oral contracts by requiring that certain contracts be in writing.* Three main purposes: 1. attempts to ease contractual negotiations by requiring sufficiently reliable evidence to prove the existence and specific terms of a contract. 2. to prevent unreliable oral evidence from interfering with a contractual relationship. 3. to prevent parties from entering into contracts with which they do not agree. So they have to consider the terms, agree to them, write them out, and sign the contract. Contracts falling within the statue of frauds: 1. contracts whose terms prevent possible performance within one year. 2. promises made in consideration of marriage. 3. contracts for one party to pay the debt of another if the initial party fails to pay. 4. contracts related to an interest in land. And although required to be in writing under the Uniform Commercial Code (UCC), and not the statute of frauds, a related fifth category is contracts for the sale of goods totaling more than $500. Contracts whose performance, based on the terms of the contract, could not possibly occur within one year fall within the statute of frauds and therefore must be in writing. The one-year period begins the day after the contract is created, not when it is scheduled to begin. A contract for lifetime employment does not need to be in writing because it is possible for the contract to be completed within one year. Meaning, someone could die before the yr is up. Similarly, contracts for complex construction projects need not be in writing because theoretically, they can be completed within one year. Like it they hire 1k workers. Legal principle: If a contract can possibly be performed within a year, even if such performance is highly unlikely, then the contract does not need a writing to be enforceable.

Agreement (element 1) Offer

The agreement consists of an offer by one party, called the *offeror*, to enter into a contract.

Adequacy of Consideration

The court will not set aside a sale because someone made a bad deal. Conversely, if the court believes fraud or undue influence occurred, the court may look at adequacy of consideration. (For example, suppose a person divests himself of all his assets for pennies on the dollar then declares bankruptcy--the court will likely review the consideration paid to determine where there was fraud by the debtor against the creditors). Legal Principle- The court seldom considers adequacy of consideration.

Legal Principle

The effect of both a negligent misrepresentation and a fraudulent misrepresentation is that the victim can either rescind the contract or keep the contract and sue for damages, whereas if the mistake is innocent, the victim can seek only rescission.

Intent

The first element of the offer. The offeror must show intent to be bound by the offeree's acceptance. courts are only concerned with the party's outward manifestations of intent, not internal thought processes. The courts interpret the parties' words and actions the way a reasonable person would interpret them. Example- if Judy is clearly joking or speaking in anger, a reasonable person would not think Judy seriously intended to make an offer and the courts would not treat her words as an offer. But tell a joke too well and you might find yourself in an unwanted contract. Legal Principle- In determining intent to enter into a contract, the courts look at the person's objective manifestation of intent and does not try to interpret what the person may have been secretly thinking. Notes- Remember prof's example, the couple that sold their farm when they were joking but their outward manifestations were that they were serious, even if in their mind's it was a joke, they had to sell the farm.

Unilateral

The offeror wants the offeree to do something, not to promise to do something. Just as the offeree is under no obligation to actually perform the act called by for the offerer, the offerer may revoke the offer at any time before the performance. Today courts hold that once an offeree begins performance, the offeror must hold the offer open for a reasonable time to allow the offeree to complete it. Example- If Jim loses his dog, he may post a sign saying, "$50 reward for the safe return of my Poodle, Frenchie." When Michiko calls and says, "Don't worry, I'll find your dog," she is not making a contract because the unilateral offer calls for an action, not a promise. Notes- -Calls for an action, not a promise. -Mow the lawn and I'll pay you $100. -A promise for an act (not promise for promise). -When you perform it, then there is a contract. -If they don't do anything, no contract, they didn't accept agreement.

Definite and Certain

The requirement, under common law, that a contract must include and clearly define all material terms.

Unilateral

The result of an error by one party about a material fact, that is, a fact that is important in the context of the particular contract. *Any* of the following conditions would permit a court invalidate a contract on grounds of unilateral mistake: 1. One party made a mistake about a material fact, and the other party knew or had reason to know about the mistake. 2. The mistake was caused by a clerical error that was accidental and did not result from gross negligence. 3. The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous.

Contracts related to an interest in land

These contracts include contracts for mortgages and leases as well as anything attached to the land.

Legal Object (4th element)

This means that to be enforceable, the contract cannot be either illegal or against public policy.

Legality

To be enforceable, contracts must have legal subject matter and must be able to be performed legally. A contract overturned for illegal subject matter or for being illegal to perform is generally declared void. A contract need not be in violation of a statue to be illegal; agreements against generally accepted public policy are also illegal and unenforceable.

Chap 17 Legal Assent

To make business transactions smoother and more dependable, courts have developed rules about when an assent to do something is legal assent, that is, *a promise the courts will require the parties to obey.* *A promise to buy or sell that the courts will require that the parties obey.*

Mitigation of damages

To recover damages in a breach of contract case, the plaintiff must demonstrate that he used reasonable efforts to minimize the damage resulting from the breach. This duty is referred to as the duty to mitigate one's damages. Like if a person calls to cancel all the reservations, you have a duty to try to rent the rooms to minimize the damages. Or if an employee is wrongfully discharged, they should look for a new job in a reasonable time to reduce damages.

Promises made in consideration of marriage

Under the Statute of Frauds, a unilateral promise to pay money or property in consideration for a promise to marry must be in writing. Mutual promises to marry do not fall within the statute of frauds. Legal Principle: Contracts in which one party promises something in exchange for another's promise to marry must have a writing to be enforceable, but mutual promises to marry do not require a writing.

Equitable Remedies

any form of relief that does not involve a request for monetary damages. A remedy that is available if there has been a breach of contract that cannot be adequately compensated through a legal remedy or to prevent unjust enrichment. think of- equity, not money.

Assignment of the contract

When a court cannot clearly tell what the parties intended, it usually considers the assignment to be of both rights and duties.

Contracts for one party to pay the debt of another if the initial party fails to pay

Within the statute of frauds. Known as secondary obligations, secondary promises, collateral promises, or *suretyship* promises. A secondary obligation occurs when a party outside a primary agreement promises to fulfill one of the original party's (primary debtor's) obligations if the original party fails to fulfill it. Example, Helen enters into a contract with Tomas to sell him her car. Rina agrees to pay Tomas's debt if he fails to pay Helen the money he owes her. Rina's promise needs to be in writing because it is a secondary obligation and therefore falls within the statute. Primary obligations are debts incurred in an initial contract. Are not in statutes of frauds and therefore need not be in writing to be enforceable. Example. Tomas's promise to pay Helen for the car. There is an exception under which a secondary obligation need not be in writing: the main-purpose rule. If the main purpose for incurring a secondary obligation is to obtain a personal benefit, the promise does not fall within the statute and does not have to be in writing. Legal Principle: Primary obligations do not require a writing, but secondary obligations do unless the main reason a person makes a secondary promise is to obtain a personal benefit. suretyship trick to remember- sure ty relation*ship* (dad) for agreeing to pay if I don't.

Chap 19 Privity of Contract

a contract is a private agreement between the parties who have entered into it, and traditionally these parties alone have rights and liabilities under the contract.

Valid

a contract that contains all 4 elements of a contract---agreement (offer and acceptance), consideration, contractual capacity, and legal object--and thus is enforceable.

delegation

a delegation occurs when a party to a contract -a delegator transfers her duty to perform to a third party- a delegatee- who is not part of the original contract. delegations transfer duties. One important distinction between assignments and delegations is apparent in the rights of the transferring party. After making an assignment, the assignor has no right left to the original contract. After making a delegation, however, the delegator is not relieved of his duty to perform. Legal principle- A party transferring her or his duties under the contract is the delegator, and the one receiving the transfer is the delegatee. After the delegation, although the delegatee is bound to perform, the delegator remains liable if the delegatee fails to perform. Think- a boss who delegates a lot of her work to you but the person held responsible for her work to her bosses is still her, not you, because you're doing her work which is her responsibility.

in pari delicto

a legal principle which means both parties are equally responsible for the illegal agreement. In that case, it does not make sense for the courts to attempt to salvage the agreement or reward either party.

Bilateral Contract

a promise in exchange for a promise. As soon as the promises are exchanged, a contract is formed and the parties' legal obligations arise. When Shannon promises to pay Gary $1,000 in exchange for his promise to paint her car on July 1, they have a bilateral contract. If either party fails to perform, the other may sue for breach. Notes- Both have to promise something in return. In opening case Hallmark said that it was a bilateral contract because when "we changed the terms, they agreed to by keeping their job." But it was not bilateral, a promise for a promise. HM didn't bind itself to anything at all, they didn't promise anything so they can't claim they have a contract. Missing consideration and element of a contract (promise).

Chap 13 Contract

a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty. A set of legally enforceable promises.

English rule

a rule that states that the first assignee to give notice of assignment to the obligor is the party with rights to the contract

Void

a void contract is in effect not a contract at all. Either its object is illegal or it has some defect so serious that it is not a contract. Ex- if you entered into a contract with an assassin to kill your business law professor, that contract would be void because it is obviously illegal to carry out its terms.

Exceptions to the Statute of Frauds

admission, partial performance, promissory estoppel

Implied Conditions

are those that are not explicitly stated but are inferred from the nature and language of the contract For example, if one enters into a contract with a builder to replace the windows in one's house, there is an implied condition that the builder will be given access to the home so that he may fulfill his obligations under the contract.

Negotiable Instruments

are unconditional written promises to pay the holder a specific sum of money on demand or at a certain time. The most common negotiable instruments are checks, notes, drafts, and certificates of deposit.

Implied Contracts

arise not from words but from the conduct of the parties. Example- if you have a dental emergency and the dentist pulls your severely infected tooth without prior negotiation about payment, or even any mention of payment, you have an implied contract for payment for her services. Notes- Creates contracts where none existed before. Fact- 3 conditions must be met for the courts to find an implied, or implied-in-fact, contract. Plaintiff provided property or service, plaintiff expected to be paid, defendant had an opportunity to reject property or service. Implied are good law, otherwise there wouldn't be services like ERs. Courts don't like to give freebies. Quasi- Prevent unjust enrichment. Knowledge of the defendant of benefits.

Recognizance

arises when a person acknowledges in court that he or she will perform some specified act or pay a price upon failure to do so. example- a bond used as bail in a criminal case. The person agrees to return to court for trial or forfeit the bond.

Termination of the Offer

can occur in one of five ways, revocation by the offeror, rejection or counteroffer by the offeree, death or incapacity of the offeror, destruction or subsequent illegality of the subject matter of the offer, or lapse of time or failure of other conditions stated in the offer. When an offer is terminated, the offeree can no longer accept it to form a binding contract.

Discharge by

conditions, precedent, subsequent, and concurrent. *Important*

Obligors

contractual parties who agreed to *do something* for the other party. Think- Obligation, now have to do something. Florida Gators are always doing something.

Liquidated Damages

damages specified as a term of the contract, before a breach of contract occurs. Typically, the courts determine the amount of damages to which a nonbreaching party is entitled. Sometimes, however, the parties recognize that if there is a breach of contract, it will probably be somewhat difficult for the court to determine exactly what the damages are. To prevent a difficult court battle, the parties specify in advance what the liquidated damages will be if there is a particular kind of breach. The parties specify these damages in what is called a liquidated or stipulated-damage clause in the contract. Can be specified as either a fixed amount or a formula.

First assignment in time rule

gives the contractual right to the *first party* granted the assignment. think- I was first, it's my right.

Formal Contracts

have a special form or must be created in a specific manner. 4 types of formal contracts- Contracts under seal, recognizances, letters of credit, and negotiable instruments. contract under seal -10 states still allow a contract without consideration to be enforced if it is under seal (literally sealed). seal or the letters L.S. (an abbrev for locus sigilli, which means "the place for the seal") at the end. Notes- certain type of form like for a deed. Informal is every other type of contract.

Punitive Damages

in contract law, are designed to punish the defendant and deter him and others from engaging in similar behavior in the future.

Discharge by performance

in most situations, parties discharge their obligations by doing what they respectively agreed to do under the terms of the contract; this is called discharge by performance.

Fraudulent Misrepresentation

is a consciously false representation of a material fact intended to mislead the other party. It is also referred to as intentional misrepresentation. Here scienter is clear: The party making the misrepresentation either knows or believes that the factual claim is false or knows there is no basis for it. Three elements: (1) A false statement about a past or existing fact that is material to the contract. (2) Intent to deceive, which can be inferred from the particular circumstances. (3) Justifiable reliance on the false statement by the innocent party to the agreement: Justifiable reliance is generally present unless the injured party knew, or should have known by the extravagance of the claim, that they false statement was indeed false. For example, a homeowner could not justifiably rely on a claim by a gardener that if she will pay him to apply a special fertilizer to her trees once a week, the trees would never die. Finally, if damages are sought, the defrauded party must have been injured by the misrepresentation.

Nondisclosure

is a failure to provide pertinent information about the projected contract. Courts will now find nondisclosure as having the same legal effect as an actual false assertion under certain conditions. 1. Relationship of trust exists between the parties to the contract. In this situation the relationship provides a reasonable basis for one person's expectation that the other would never act to defraud him or her. 2. There is failure to correct assertions of fact that are no longer true. Caroline's failure to inform Vito of the recent outbreak of rust on her "rust-free" car that Vito agreed to purchase next month is nondisclosure. 3. A statue requires the disclosure, such as mandatory disclosures under residential real estate sales laws. 4. The nondisclosure involves a dangerous defect, such as bad brakes in a car that is being sold. Nondisclosure is especially likely to provide the basis for rescission .

Admission

is a statement made in court, under oath, or at some stage during a legal proceeding in which a party against whom charges have been brought admits that an oral contract existed, even though the contract was required to be in writing. If the person admits that there was an oral contract, the courts would uphold the contract. Otherwise, it would be unenforceable.

Letter of credit

is an agreement by the issuer to pay another party a sum on money on receipt of an invoice and other documents. The Uniform Commercial Code governs letters of credit. From online- A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. Another definition- a letter issued by a bank to another bank (typically in a different country) to serve as a guarantee for payments made to a specified person under specified conditions.

Prenuptial Agreement

is an agreement two parties enter into before marriage that clearly states the ownership rights each party enjoys in the other party's property. Writing is required, although not sufficient, to establish enforceability. Although consideration is not legally required, courts tent to privilege prenuptial agreements that include it. Consideration offers evidence that both parties understand and agree to all the terms of the agreement and that the agreement is not biased in favor of one party. Remember- consideration (thing given) is exchanged for another consideration.

Injunction

is an order either forcing a person to do something or prohibiting a person from doing something. Like if your club singer goes to work for another club that will pay her twice as much, can't really calc how much damages there will be so monetary damage isn't going to be an adequate remedy. an equitable remedy

Misrepresentation

is an untruthful assertion by one of the parties about that material fact; it prevents the parties from having the mental agreement necessary for a legal contract. They only appeared to agree, so their contract lacked legal assent. The courts insist on a meeting of the minds for a valid contract. Thus, they might rescind a contract even though the person making the false assertion was entirely innocent of any intentional deception.

Voidable Contract

is one or both parties has the ability to either withdraw from the contract or enforce it. Certain types of errors in the formation of a contract can make it voidable. Contracts entered into as a result of fraud, duress, or undue influence, may be voided by the innocent party. contracts by minors are usually voidable by the minor. If the parties discover the contract is voidable after one or both have partially performed, and one party chooses to have the contract terminated, both parties must return anything they had already exchanged under the agreement so that they will be restored to the condition they were in at the time they entered into it.

Concealment

is the active hiding of the truth about a material fact, for example, removing 20,000 miles from the odometer on your car before selling it.

Chap 14 Agreement

is the first element of a contract. It is made up of an offer and an acceptance. The elements of an offer are (1) serious intent by the offeror to be bound to an agreement. (2) reasonably definite terms (3) communication to the offeree.

Promissory Estoppel

is the legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract. The reliance must have been reasonably foreseeable; that is, the party who did not rely on the contract should have known the other party was going to rely on it.

Compensatory Damages

money intended to restore a plaintiff to the position he was in before the injury. Can recover provable losses that were foreseeable at the time the contract was entered into. Expectation damages compensate a person for the benefit she or he expected to gain as a result of entering into the contract. Incidental damages- Incidental damages refers to the type of legal damages that are reasonably associated with, or related to, actual damages.

Usury

occurs when a party gives a loan at an interest rate exceeding the legal maximum. Statues prohibiting usury are found on the books of nearly every state. Most states with usury statues allow corporations willing to pay more to lend and borrow at rates exceeding the maximum. The intent is to facilitate business transactions in order to keep the economy in a healthy state. Many states allow parties to make small loans at rates above the max to parties that cannot obtain a needed loan at the statutory maximum. The belief is that if people need money and the statutory max is not including others to lend, certain parties will make the necessary loans at a higher rate as long as the loan is "small." This exception allows cash advance institutes to operate. A few states declare all usurious loans void, which means the lender is not entitled to recover either interest or principal from the borrower. A larger number of states allows lenders to recover the principal but no interest. States most favorable toward lenders allow recovery of the principal as well as interest up to, but not exceeding, the statutory maximum. trick to remember- Usury is like when mobsters USE you to get more money. They lend at a very high interest.

Assignment

occurs when a party to a contract---an *assignor*--- transfers her rights to receive something under the contract to a third party---an *assignee*, giving the assignee the right to collect what was contractually agreed on in the original contract. Example, Bina agrees to sell her car to Jose for $8,000. She then assigns her right to receive Jose's payment to Kelly. Kelly, who was not party of the original contract is an assignee and now has the right to receive payment from Jose for Bina's car. When an assignor transfers her rights to an assignee, the assignor legally gives up all rights she had to collect on the contract. Legal Principle- A person who transfers his or her rights under a third party is an assignor, and the person who receives the transfer and is now entitled to enforce the rights is the assignee.

Concurrent Conditions

occurs when each party's performance is conditioned on the performance of the other. For example, when a buyer is supposed to pay for goods on delivery, the buyer's duty to pay is impliedly conditioned on the seller's duty to deliver the goods, and the seller's duty to deliver the goods is impliedly conditioned on the buyer's duty to pay for the goods. The legal effect of a contract's being concurrently conditioned is that each party must offer to perform before being able to sue the other for nonperformance.

Duress

occurs when one party is forced into the agreement by the wrongful act of another. Any of the following would trigger a successful request for rescission on grounds of duress: - One party threatens physical harm or extortion to gain consent to a contract. - One party threatens to file a criminal lawsuit unless consent is given to the terms of the contract. (Threats to bring civil cases against a party to a lawsuit do not constitute duress unless the suit is frivolous.) - One party threatens the other's economics interest (this is known as economic duress). For instance, a person refuses to perform according to a contract unless the other person either signs another contract with the one making the threat or pays that person a higher price than specified in the original agreement. The injured party makes the case for duress by demonstrating that the threat left no reasonable alternatives and that the free will necessary for legal consent was removed by the specifics of the threat. Like when my acct prof said he knew we're all taking his class under duress, we don't want to be there but have to.

Implied Ratification

occurs when the former minor takes some action after reaching the age of majority consistent intent to ratify the contract. Example, most courts find that continuing to act in accordance with a contract, such as continuing to make regular payments after reaching the age of majority, constitutes ratification.

Express Ratification

occurs when, after reaching the age of majority, the person states orally or in writing that he or she intends to be bound by the contract entered into as a minor.

Partial Payment of a Debt

partial payment of a debt may or may not be valid consideration, depending on whether the debt is liquidated or unliquidated.

Substituted Contract

parties mutually agree to discharge each other from the contract by substituting a new agreement

Undue influence

refers to those special relationships in which one person takes advantage of a dominant position in a relationship to unfairly persuade the other and interfere with that person's ability to make his or her own decision. Factors that enter into the finding of undue influence are the following: 1. Was the dominant party rushing the other party to consent? 2. Did the dominant party gain undue enrichment from the agreement? 3. Was the nondominant party isolated from other advisers at the time of the agreement? 4. Is the contract unreasonable because it overwhelmingly benefits the dominant party? Legal Principle: The essential element of undue influence is the existence of a dominant-subservient relationship, so if you are going to enter into a contract with someone with whom you have such a relationship, to ensure that the agreement will be enforced in the future, make sure that the person in the subservient position has independent advice before entering into the contract.

Innocent Misrepresentation

results from a false statement about a fact material to an agreement that the person making it believed to be true. The person had no knowledge of the claim's falsity. We say he or she lacked scienter (from the Latin root of the word meaning "knowledge"). Innocent misrepresentations permit the misled party to rescind the contract. However, because the other party had no intent to mislead, the aggrieved party cannot sue for damages.

Quasi-Contracts

sometimes called implied-in-law contracts but are not actually contracts. Rather, in order to prevent one party from being unjustly enriched at the expense of another, the courts impose contractual obligations on one of the parties as if that party had entered into a contract. Example- Diego hears a noise in his driveway, he looks out and sees a group of workers apparently getting ready to resurface his driveway, the doorbell rings, he doesn't answer, he goes to his basement and stays there til the workers have gone and he has a new driveway. When he receives a bill from the paving comp, he refuses to pay because he did not ask to have the work done. In such a case, where the defendant knew the comp was getting ready to bestow on him a benefit to which he was not entitled, the court will probably impose a quasi-contract, requiring that Diego pay the paving comp the fair market value of the resurfacing. Imposing such a duty, prevents him from being unjustly enriched at the expense of the paving comp. But if he was out of town when his driveway was mistakenly repaved, he would have gotten lucky. He could have done nothing to prevent the benefit and the court isn't going to make him pay for the pavers' mistake. Legal Principle- Recovery in quasi-contract may be obtained when (1) a benefit is conferred by the plaintiff upon the defendant; (2) the defendant has knowledge of the benefit that is being bestowed upon her, and (3) the defendant retains the benefit under circumstances in which it would be unjust to do so without payment.

Consideration (element 2)

the bargained for exchange or what each party gets in exchange for his or her promise under the contract.

Revocation

the offeror can revoke the offer at any time unless the offeree entered into an option contract (offeror holds offer open for a while because offeree gave consideration) with the offeror. As a general rule, revocation is effective when the offeree receives it. The offeror should deliver the revocation personally.

Restitution

the return of any property given up under the contract. an equitable remedy

Communication

the third element of an offer. The offer must be communicated to the offeree or to the offeree's agent. Either can accept the offer. Legal Principle- To have a valid offer under the common law, you need (1) the intent to be bound by an acceptance, (2) definite and certain terms, and (3) communication to the offeree.